Mining stocks and sector-related exchange traded funds surged Monday ahead of Alcoa (NYSE: AA) earnings report and on strengthening precious metals.
The SPDR Metals & Mining ETF (NYSEArca: XME) jumped 3.9% Monday. XME increased 38.2% year-to-date.
The metals & mining sector advanced Monday as investors braced for the first quarter results with Alcoa unofficially kicking off the earnings season after the bell.
AA was up 4.0% Monday. Alcoa makes up 4.2% of XME’s underlying holdings.
Traders will be looking for evidence that Alcoa boosted sales from its downstream parts business to offset declining metals prices, reports Sonja Elmquist for Bloomberg.
“The key of what the valuation is really depends on the downstream,” David Lipschitz, analyst at CLSA Americas LLC, told Bloomberg. “So that’s the big question.”
Alcoa Chief Executive Officer Klaus Kleinfeld previously stated that he would split the copmany into those one that makes metal products from those that produce the metal itself. The two independent companies are scheduled to be formed in the second half.
Moreover, the mining space is rising on improving commodities prices, notably gold and silver. Comex gold futures rose 1.2% to $1,258.1 per ounce Monday while Comex silver futures gained 3.6% to $15.9 per ounce.[related_stories]
XME also includes a 9.8% tilt toward silver miners and 9.2% toward gold miners.
The more muted Federal Reserve interest rate expectations are weighing on the U.S. dollar, bolstering dollar-denominated precious metals. The Fed has hinted at a gradual rate hike and only expects raising rates two times this year, compared to its previously stated four hikes, amid concerns over the global economy.
SPDR Metals & Mining ETF